Changes to 2009 Forms

Updates to the 3805Z Booklet on 02/24/2014 –– Enterprise Zone Business Booklet

We replaced text on Page 18, Worksheet VI, Section A, Line 6.

Previous Version

6. Enter the amount from form FTB 3805V, Part 1, Section A, line 18

Revised Version

6. Enter the amount from form FTB 3805V, Part 1, Section A, line 20

Reason for the changes

AB 1412 (Stats. 2013, ch. 546), signed by the Governor on October 4, 2013, retroactively allows the Qualified Small Business Stock (QSBS) deferral and 50 percent gain exclusion for tax years 2008 through 2012. The FTB 3805Z Booklet, Worksheet VI is indirectly affected by AB 1412 changes. Worksheet VI references form FTB 3805V which had line number changes due to AB 1412.

Impact

Updates to the 3805Z Booklet on 02/21/2013 –– Enterprise Zone Business Booklet

We replaced text on Page 19, Worksheet VI, Section A, Line 6.

Previous Version

Enter the amount from form FTB 3805V, Part 1, Section A, Line 20

Revised Version

Enter the amount from form FTB 3805V, Part 1, Section A, Line 18

Reason for the changes

The Court of Appeal’s held in Cutler v. Franchise Tax Board (2012) 208 Cal. App. 4th 1247, that the qualified small business stock exclusion and deferral statutes under California Revenue and Taxation Code (R&TC) Sections 18152.5 and 18038.5 are unconstitutional. These sections are now invalid and unenforceable.

Impact

The revision increases the tax liability for taxpayers who reported a qualified small business stock exclusion or deferral for taxable years beginning on or after January 1, 2008.

Individuals use the California Schedules CA (540) or CA (540NR) line 12 and line 18; the federal Schedule E, line 26, line 32, and line 40; and the federal Form 4797, line 9.

Revised Version:

Individuals use the California Schedules CA (540) or CA (540NR) line 12, line 14, and line 18; the federal Schedule E, line 26, line 32, and line 40; and the federal Form 4797, line 9.

Reason for the changes

Net business income includes recapture amounts resulting from the sale of business property. We added line 14 to include the recapture amounts from the sale of depreciable business assets.

Impact

This change includes recapture amounts in the net business income computation. This may result in an increased tax liability if the taxpayer meets the criteria for a NOL carryover suspension and credit limitation.